HomeAdvisor CEO: The Marketplace for Home Services Is ‘Operationally Intense’

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Finding the right person to do a job around the house, whether it is a quick repair or major renovation, can often be a nerve-wracking chore.

IAC’s HomeAdvisor has built a business around taking some of the pain out of the process by featuring prescreened, local service professionals at its online marketplace. CEO Chris Terrill says his company has a large network of vetted pros for hire, who all submitted to background checks and customer reviews.

The idea seems to be catching on with the masses. HomeAdvisor is approaching $500 million in revenue this year and is highly profitable, he says. Terrill, who will be a speaker at October’s Street Fight Summit in New York, caught up with us recently about the challenges of operating in his sector and how millennials might help this industry scale up even more.

The home services vertical has been a particularly crowded space in local tech; why is that?
It’s a huge market — it’s a really huge market that has yet to come fully online. I’ve argued it’s the last marketplace to go digital. Seventy percent of people still say they find help through word of mouth. That’s turning to friends, family and neighbors, even though they know that’s not a great way to get the help they need. They don’t turn to friends and family for movie reviews or restaurant reviews. I think people are nervous about their homes, they don’t really understand how to operate so they rely on an outdated method that they know is not great.

With the rise of HomeAdvisor, making it very easy for people to connect with high quality, prescreened service pros, you’re starting to see more and more people come into this online marketplace.

You see people trying to get into this space because it’s such a huge market, so much is offline moving online. I would take some exception to “crowded” only from the sense that there are many people trying, few have succeeded. It’s very, very expensive. We’ve invested over $1 billion in this industry and our brand.

It’s also very complex to balance supply and demand in this marketplace. We’ve got 2,000 employees and we’ve been working for 15-plus years building highly sophisticated algorithms to make sure we can deliver good experiences.

We’re the only national network for this type of on-demand service. It’s really hard to succeed. If you go to a VC (venture capitalist) and say, “Give me $25 million, $50 million, or in some cases $100 million” — that’s just not enough. It’s not enough money to get these service providers and not enough to build up liquidity. It’s not enough to tackle the extremely complex technology needed to make this work. There are many other digital industries that are a lot easier to get into than this one.

There’s a long list of people who tried and failed, and failed miserably. A few have been able to hang around. Almost no one other than us is profitable. Even when you see larger players trying to come in, I’m not sure they want to invest 100s of millions of dollars and years of time and effort, versus working on artificial intelligence or self-driving cars or things like that.

How has HomeAdvisor approached this market and why have you had such success?
When we looked at the business, we felt like nobody was exclusively focused on the home services space. At the time when I took over the company [in 2011], we were in multiple vertical categories. Our view was this is such a big space and very complex. To deliver really good experience, you have to be focused.

HomeAdvisor CEO Chris Terrill
HomeAdvisor CEO Chris Terrill

We got rid of all our other verticals. No party planning, wedding photography, senior care, deejays, or dog walkers. We just focused on being the best home services experience. We refocused our brand [from ServiceMagic] to HomeAdvisor. We rebuilt our consumer and service provider experience. We went on TV with our message and I think that resonates.

When people think about their home, they want someone who is just focused on the home. They’re not also trying to find a dentist for them. That’s been a big part of our success. We’ve been very maniacally focused on the home services space while others have tried to do a lot of categories. We don’t want to be ZocDoc, Rocket Lawyer, or anything else. We just want to be the best at home services. That’s difficult if you can’t focus.

Is there anything that others can learn from your experiences in targeting a specific local vertical?
If you’re going to get into this space, you better be prepared to really invest and for the long haul. There are no quick fixes or technology that’s suddenly going to turn this thing around. Service providers are maybe three-man shops, very busy, and often out doing the job. It’s hard to get a hold of them and to really participate. In our case, we give them very simple ways to manage their business. We’ve given them a great way to get high quality homeowners who are raising their hands saying they’re ready for help.

My lesson to anyone would be to pick another category. There’s much easier marketplaces out there to go after. This is a really hard and complex one. I’ve spent time working in online dating, at Blockbuster.com — I’ve been other places. This is by far the most complex. It’s operationally intense.

What lessons have you learned about the ways people book these kinds of services?
The thing we really learned is different types of needs require different types of experience. If you’re looking for someone to repair a leak, it’s different than looking for someone to come in and do a $50,000 kitchen renovation. What “on demand” means to homeowners and service providers can be different, yet you have to be able to accommodate those scenarios. It’s taken us a long time to figure that out. From our perspective, our on-demand platform has been a huge success.

What are the main concerns or questions that consumers have using a platform such as yours?
Homeowners want to know they can find someone they can trust to come in their homes. Is this person reliable? They’ve been screened for financial and criminal background. They want to see that other people have rated and reviewed them, and they’ve been vetted. They want to know that they’re paying a fair price.

When you look at our price guide, we have the largest database of completed projects down to the zip code level. That gives homeowners the ability to see what something should cost. So they can hire with confidence and feel good about the job that’s done. They want to know there’s a sophisticated, mature company standing behind the process.

How can a tech company retain that level of assurance when representing so many pros?
We spend north of $4 million or $5 million a year on screening and approving. We reject 10 to 15 percent of all pros who apply. It gives homeowners the confidence that somebody is paying attention and only letting the best in. These service providers have to compete in our ecosystem. If you don’t show up on time, do good work, or get good reviews, you’re not going to do well.

What is the vetting process like?
You fill out an application; we’ll go through using social security numbers and other variables to do a background check with all publicly available documents that we can get a hold of on the local and national level. It’s very expensive and time consuming, but we feel it’s important.

What do you see as the next steps and evolution for this market?
We’re hitting that tipping point where you’ll see that 70 percent of people relying on offline word-of-mouth begin to move consistently online. The catalysts should be millennials who are just now starting to buy their first homes. As they get more discretionary income, buy that second home and have their first child, I think you’re going to see this space grow rapidly for years to come.

headshot Joao-Pierre RuthJoão-Pierre Ruth is a freelance writer, editor, photographer, and the New York editor with Xconomy.

Hear more from HomeAdvisor’s Chris Terrill at Street Fight Summit on October 25th in New York. Click here for tickets and more info!